Future proof your financial advice business- Blog Series Part 2

By Marina Pretorius

We can never know for sure what the future brings but we can follow the patterns and trends and envision a future that we want to create. At Amity Investment Solutions we do not only research investment trends but also stay abreast of the changing financial advice landscape. In part 1 of the blog series we shared three drivers of change. We specifically investigated these drivers more intensely as the research showed it relates to the sustainability of the financial advisory profession.

Changes in client expectations, the drive from regulators to ensure suitable advice, and the understanding we have today of behavioural finance all points to an increased need for personal financial advice. Automated, AI driven financial advice or merely product driven advice, could however challenge this status quo in future years to come.

Financial advisors who want to embrace these changes may benefit from the following:

  1. Take time to develop and articulate the FSP’s value proposition.

Having clarity about what the value is of what you do, who your target market is, what your offering entails and proactively determining what the experience is you want clients to have, will determine your marketing message. It will also guide you in how your advice processes need to be designed, where you as the advisor should spend your time and ultimately what kind of systems and skills you will require.

  1. Design an advice process that is client centric.

Every step in the advice process should be aimed at creating engagement and empowering the client to create a financial plan that is focused on helping them achieve a life well lived. Rob Knapp the former managing director of Merrill Lynch and author of “Supernova advisor” said: “he who owns the plan owns the client”. Advisors who understand their clients and manage a financial plan that is personal and engaging, will develop loyal client relationships and deliver value that clients will be willing to pay a premium for.

  1. Consider the differentiated roles that you as a financial advisor will need to take up

The research that we’ve done leads us to believe that the ultimate value proposition will be to deliver financial wellbeing to clients.

It is very likely that advisors will need to fulfil four roles:

Role 1: Financial Planner

The starting point for any form of change is awareness. From a financial advice perspective, it means the client needs to know the health of their wealth. To be able to understand this, clients need an interpreter. Financial advisors should consider a role called financial physicians. This is a term Prof Meir Statman from Santa Clara University uses and is defined by someone who gives clients a diagnosis of their financial position. This requires advisors to develop a way of depicting and interpreting the client’s current financial position and to help them get an awareness of the consequences of their financial habits and beliefs.

The advisor should not only focus on the current financial position but should also assist the client in creating a vision of their future. As planner, advisors need to adapt their planning process to explore the life events that may impact clients lives and help them explore goals for the future. Goals have a big value in motivation and decision making, which in turn helps in managing client expectations and their behaviour. This also assists in creating context for recommended financial strategies, which provides purpose and leads to clients being engaged in their financial plan.

Role 2: Financial coach

To be able to deliver financial wellbeing we need to influence financial behaviour in a way that client’s money beliefs and habits will be healthy and in support of their goal achievement. This will require advisors to develop typical coaching skills, listening skills, and asking the right questions which will change the advice process from telling clients what to do, to enabling them to make better financial decisions. As mentioned before clients want to be empowered and enabled to feel in control to experience financial wellbeing.

(Read more about these skills in Part 3 of our blog series, coming August 2022)

Role 3: Consultant

In this role, the financial advisor takes on the hat of a technical expert that can, for instance, evaluate financial products. They can also advise on the tax implications and the best way of implementing financial decisions within the context of the client’s financial plan. Another form of taking up this role is to build up a trusted network of technical experts in specific fields to connect your client to. In this way all expertise are not centered in the FSP, but in the network that he or she creates around their client, whilst maintaining the primary relationship and strengthening the value proposition.

Role 4: Administrator

Implementing a financial wellbeing plan can be as daunting as envisioning it for someone unfamiliar with the concept. In this role, the financial advisor helps the client to organise their financial affairs and assist in implementing financial decisions. The administrator role could take on many forms and will be influenced by the skills and capacity of the client to drive the implementation, as well as the capacity of the FSP. The focus for this role is to ensure implementation administration is done in time to deliver on the financial wellbeing plan.

In our view, the primary shift that FSP’s need to make to future proof their business through a new value proposition, is to move from selling products to enabling financial wellbeing for their clients. At the heart of this is knowing the client better and being able to influence financial behaviour that will lead to outcomes that will help clients have a life well lived.

This requires FSP’s to consider adopting a coaching approach when engaging with clients on their journey to financial wellbeing.

Coming Up: Future proof your financial advice business (Part 3)

Adopting a coaching approach to financial advice – Key Skills and Questions to start with

August 2022

The Amity Advisor Experience team will assist with any queries you may have!
Go to our contact us page to find the necessary details.
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